Walgreens Boots Alliance is getting closer to selling its stake in doctor-staffed clinic operator VillageMD, which has already cost the drugstore giant billions of dollars.
Walgreens is working with the investment banking firm Evercore and the consulting firm Alvarez & Marsal as advisors in the sale, several news outlets reported Thursday. Walgreens had no comment when reached Thursday afternoon.
Walgreens chief executive Tim Wentworth has said the company was looking to reduce its investment in VillageMD after billions of dollars in losses and the need to focus on more profitable ventures to turn around the drugstore chain. And in January of this year, Wentworth said the exit process from VillageMD had begun.
“We are underway with a sale process for Village Medical, while continuing to evaluate the best options for Summit/CityMD,” Wentworth told analysts and investors on Walgreens fiscal first quarter earnings call last month. “We are encouraged by the leadership of new (VillageMD) CEO and healthcare veteran Jim Murray. To be clear, our ultimate intent to exit is unchanged, and we remain committed to redeploying any proceeds to reduce our net debt and improve the health of our balance sheet.”
Walgreens invested more than $6 billion in VillageMD under former chief executive Roz Brewer to take a controlling stake, but the company has already scaled back dramatically on the expansion of doctor practices and clinics the company opened attached to Walgreens. In 2020, Walgreens said it planned to open 500 to 700 “Village Medical at Walgreens” physician-led primary care clinics in more than 30 U.S. markets over five years, with the “intent to build hundreds more thereafter.”
But Wentworth said a year ago that Walgreens and partner VillageMD have slowed the number clinic openings in part because the operators haven’t been able to fill their “patient panels,” which are a certain number of individual patients under the care of a specific provider.
The investment hasn’t gone well. Walgreens total operating loss for the first nine months of fiscal 2024 grew to more than $13 billion, reflecting “a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest” the drugstore chain reported last June.
VillageMD CEO Tim Barry left the company late last year and was replaced by the primary care company’s chief operations officer Jim Murray to serve as interim chief executive Officer.
Given the huge losses Walgreens has incurred from its stake in VillageMD, it’s unclear what the drugstore giant would get for the Chicago-based company. In January, Walgreens’ U.S. Healthcare segment — which includes the primary care business VillageMD, the urgent care provider CityMD and the primary care provider Summit Health as well as the CareCentrix home care business — had first quarter sales of $2.2 billion compared to $1.9 billion in the year-ago period with “growth in all businesses compared to the year-ago quarter.” The improvement in U.S. healthcare helped narrow operating losses in the segment to $325 million compared to $436 million in the prior year.
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